The key US CPI is scheduled on Wednesday, a key data to be carefully by all market participants globally. As per consensus estimate from economist, the CPI for August is expected to read at 2.9 per cent for August from 2.9 per cent reading for July. While consumer prices ex food and energy are expected to read at 3.2 per cent, unchanged from July. Ahead of the US Fed meeting scheduled on 17-18 Sep, the data carry strong significance for Global equity, bond, forex and commodities market. A reading of CPI below 2.5 per cent may push the US dollar index lower and bring positive momentum in riskier asset classes. A 2.5 per cent or below reading in CPI may prompt the US Federal Reserve Bank to cut rates as much as 50 basis point which is yet to cur fed funds target rate since Russia- Ukraine war.
US fed Chairman, Powell in August 23 Speech, said that “the time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”Another FOMC voting member of 12-member MPC of Fed, Atlanta Fed President Raphael Bostic said “we must not maintain a restrictive policy stance for too long. I believe we cannot wait until inflation has actually fallen all the way to 2 percent to begin removing restriction because that would risk labor market disruptions that could inflict unnecessary pain and suffering.”
Hence, we all waiting to get some positive trigger from the data. Today, we have seen some improvement in IT stocks ahead of US data, with INFY and TCS added 1.03 per cent and 1.36 per cent respectively. The mid-sized IT stock Co-forge advanced 4.7 per cent and LTI Mindtree gained 3.02 per cent. However, we may see some ranging momentum in IT stocks tomorrow with underlying short to medium term trend remains bullish. We expect Indian IT stocks may lead a decent rally going forward with large cap INFY may advance towards 2300-2350 in the short to medium time horizon. When Infosys advances, some mid-sized IT Stocks may advance sharply. Even major fund houses and portfolio managers are trying to rebalance towards IT segment.
For the coming weeks for cash, one should keep on looking at Auto stocks, Consumer durable stocks, Consumer durable finance, FMCG for Festive demand for short-term swing trading along with IT. Banks are still wait and watch mode.
In commodities which are active at the time of writing, WTI Crude oil futures traded on MCX, managed to take support at 5650 with immediate resistance at 5800. Crude has been trending down since few days due to weak manufacturing data from US, Europe and China signalling demand concerns. Despite geo political tension in the middle east, supply has been at comfortable range. Downside may be limited here with possible focus from OPEC on supply cuts if rates drops further. From trading perspective, one can look at Bull Call Spread in Crude. One can buy ITM 5700 CE which is trading at 140 and sell OTM CE at 53. The current spread is near 90 and any recovery towards 5850 can increase the spread between these two contracts. Technically, a breakout and sustained trading above 5800-5820 range may push Crude oil prices towards 5900 kind of levels going forward. In other energy segment, trend remains unclear in Natural Gas with prices oscillating between 165-170 to 190-195 range. Winter demand is yet to come which can possibly lift NG prices in US later as the commodity is sitting with strong supply at henry hub.
In the equity market tomorrow, one can expect some ranging movement in Indices ahead of data. NIFTY has resistance at 25100-120 range with immediate support at 24900. The formation in NIFTY is Doji suggesting indecisiveness at the moment. Bank NIFY also formed a similar pattern ahead of expiry tomorrow. Bank Nifty has support at 50950 levels and if the level is taken out can expect some mild decline. Upside in Bank Nifty is capped at 51400-500 range which has been a strong seller’s zone.
The report is being prepared by Bitupan Majumdar, an independent SEBI registered research analyst with registration code INH30006962. Please consult your financial advisor before making investment decision.
